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Big Bankruptcies' Big Fees Raising Questions

Posted by Brian Baxter

The Chapter 11 cases of copper miner Asarco and casino operator
Station Casinos have been a gold mine for bankruptcy lawyers. Baker Botts broke the $100 million billable mark in the
five-year-old Asarco case last August, and the legal bills in the seven-month-old
Station Casinos case are approaching $20 million for a dozen law firms. But future fees might not be paid out so easily as the bills have come under increasing scrutiny.

We've taken a close look at fee filings in both cases. Hourly billing rates for attorneys, when available, are listed in
parentheses.

STATION CASINOS

When we first reported on the Chapter 11 filing of Station Casinos
last summer, it struck us as one of the more twisted and complex bankruptcy cases around. And not for nothing. Since Station filed for bankruptcy
on July 28, nearly a dozen law firms have landed some piece of the work for the struggling Las Vegas-based
casino operator. Station has
paid out nearly $20 million in legal bills in less than eight months.

After approving $12 million in interim fees and expenses this week for several other law firms and accounting firms, Zive took special note of a $19,500 hotel bill presented by one accounting firm, the Sun reports. "I
don't know if [Station's] hotels still comp, but we need to be careful,"
Zive said. "This is not a large amount of money but we need to be careful." Zive also highlighted the $995 hourly rates of
two lawyers from Station's lead bankruptcy counsel at Milbank, Tweed, Hadley
& McCloy. "When you bill at that rate, I expect a great deal of
efficiency," he said.

We examined seven months
of fee filings in the Station case and have noted some of the top law-firm billers between the time of Station's bankruptcy filing on July 31 through January 31 of this year:

Milbank: The firm is lead bankruptcy counsel to Station
in its Chapter 11 case. Paul Aronzon, Milbank's financial restructuring
cochair, and bankruptcy partner Thomas Kreller led the team handling the matter. The firm has requested nearly $10 million for postpetition fees and expenses.
Milbank also received $4.9 million for prepetition restructuring counsel, along
with $6.8 million for general services legal work. The firm was paid a $1 million
retainer. Milbank partners are billing between $740 and $995 per hour and counsel
between $700 and $905; associates hourly rates range from $285 to $685.

Lewis and Roca: Bankruptcy chair Bruce Beesley and
counsel Laury Macauley are serving as local counsel to Station. The firm, which
has not yet submitted postpetition requests for compensation, was paid a
$150,000 retainer prior to the debtor's Chapter 11 filing.

Squire, Sanders & Dempsey: The firm is serving as
special counsel to a litigation committee of Station's board of directors.
Bankruptcy chair Stephen Lerner, global managing partner Howard Nicols, and
litigation partners David Alexander and Scott Kane are leading a Squire team that has requested
nearly $1.5 million in fees and expenses. The firm, which is investigating a 2007 leveraged buyout that took Station private, was also paid $1.2 million
for its services prepetition and received a $125,000 retainer.

Gibson, Dunn & Crutcher: The firm is serving as
special counsel to a group of commercial mortgage-backed securities debtors.
Oscar Garza, cochair of the firm's national business reorganization
practice, and real estate restructuring partner Dennis Arnold are leading a
Gibson Dunn team that has requested nearly $1 million in fees and expenses. The firm was paid a $350,000 retainer for prepetition
services.

Fried, Frank, Harris, Shriver & Jacobson: The firm is
serving as lead counsel to Station's official committee of unsecured creditors.
Brad Scheler ($1,100), the chair of Fried Frank's bankruptcy and restructuring
department, and senior bankruptcy litigation partner Bonnie Steingart ($880)
are leading a Fried Frank team that has requested more than $4.5 million for
fees and expenses.

Greenberg Traurig: The firm is serving as Nevada counsel
to the unsecured creditors committee. Business reorganization and bankruptcy
partner Brett Axelrod ($575) and of counsel Anne Loraditch ($425) are leading a
Greenberg team that has requested nearly $600,000 for fees and expenses. The firm listed new hourly rates for its Nevada lawyers on January
1, with partners now billing between $415 and $620 per hour (as opposed to $335
and $1,050) and associates moving to hourly rates ranging from $230 to $390
(previously $175 to $565).

Quinn Emanuel Urquhart Oliver & Hedges: The firm is
serving as conflicts counsel to the unsecured creditors committee. Bankruptcy litigation partners Susheel Kirpalani and Eric Winston
are leading a Quinn Emanuel team that has requested nearly $2 million for fees
and expenses.

Maupin, Cox & LeGoy: Bankruptcy partner Christopher
Jaime and litigation partner Donald Lattin have recently been hired as Nevada
conflicts counsel for the unsecured creditors committee. Partners at the firm
are billing between $395 and $450 per hour, while associates are ranging from
$175 to $250.

Station has until the end of March to produce a viable
reorganization plan. While the debtor has announced a tentative deal with
mortgage lenders on a restructuring plan, waiting in the wings is Boyd Gaming
Corp., which submitted a $2.45 billion bid to buy Station out of bankruptcy in
December. Boyd, advised by attorneys from Morrison & Foerster, said earlier
this week it was still "actively pursuing" Station, according to The
Wall Street Journal.

Since then Baker has submitted additional fee requests
bringing its bankruptcy bill to more than $113 million, not including an
enhancement fee of nearly $23 million that the firm is seeking for legal advice
that allowed Asarco to finally emerge from bankruptcy into the arms of its
former parent, Grupo Mexico. (The enhancement fee is calculated as a 20 percent bonus to Baker's regular fees in the bankruptcy.)

Now Grupo Mexico and its outside lawyers at Milbank (the firm is also representing Asarco) are questioning Baker Botts's fees. Asarco has filed proposed findings and conclusions
questioning Baker's counsel in the Chapter 11 case, according to BankruptcyLaw360. Baker has filed an objection to those findings, arguing that they jeopardize the firm's
ability to collect its fees.

Jack Kinzie, the chair of Baker's bankruptcy and
insolvency practice, did not immediately respond to a request for comment. (The firm filed a motion to withdraw from the case as counsel to Asarco in December, after the sale of the company to Grupo Mexico closed.)

Asarco has already filed a motion to appoint a fee examiner to review
Baker's fees.

We will continue to follow this unfolding fee fight in the
months ahead.

Comments

Add to the bankruptcy fees the legal fees Station is paying for litigation in its CA tribal casino project with the Graton Rancheria. This project is currently stuck in federal court on a land-to-trust challnege to the Dep't. of the Interior, and will be in federal court again on the casino's environmental study at some time in the future.